The greedy analysts had talked Macquarie Group prospective earnings up in recent weeks, and then down, when yesterday’s update fell short of their estimates.
The shares end down more than $3, or 6%, at $47.28 after the company predicted a full-year profit of more than $1 billion that fell short of the amount analysts had forecasting.
That was the biggest fall in 8 months and the shares ended around three month lows.
Macquarie said second-half earnings in the six months to March 31, could be up as much as 10% over the first half as economic conditions around the world continue to improve.
Macquarie maintained its usual caution, saying in its operational briefing yesterday that it now expects profit for the final six months of the financial year to be broadly in line with its first-half profit of $479 million.
That will be after a number of one-off items, such as acquisition costs and impairment charges, offset by a windfall from the sale of management rights from its listed funds.
Analysts said there was disappointment because they and many investors (i.e. big institutional funds) had hoped for results above market forecasts, and a consequent upgrade in the share price.
Yesterday’s statement from the bank indicates full year earnings around $1.01 billion, just below market expectations at $1.04 billion.
The difference is hardly the reason to drive a sharp sell-down like yesterday.
Perhaps it was more a result of take the profits and run for many big investors who held the shares from last year’s big issue by Macquarie.
Macquarie shares have more than doubled in the past year, all the more reason to cash in and sit on the sidelines.
Seeing the bank earned $871 million in the previous year, a profit of $1 billion would be a solid rebound for a bank that remains in business, despite many analysts all but burying it a year or so ago.
While uncertain markets still made forecasting difficult, there was potential for the second half result to be 10% higher than the first half’s $479 million, Sydney-based Macquarie said in its statement yesterday.
CEO Nicholas Moore said the second half profit forecast included expected one-off items, including listed fund initiatives, accounting for deferred remuneration, acquisition and integration costs and impairments.
He said the December quarter operating results for Macquarie Securities Group, Macquarie Capital, Fixed Income, Currencies and Commodities (FICC) and Corporate and Asset Finance were down on the strong September quarter but up on the June quarter.
"The December quarter operating results for Banking and Financial Services and Macquarie Funds Group were broadly consistent with prior quarters, with growth in funds under management and client numbers," Mr Moore said.
Swing factors for the rest of the year included the completion rate of transactions.
"Despite improving trends in a number of major markets, we continue to maintain a conservative approach to funding and capital," Mr Moore said.
"Our strong balance sheet, strong team and encouraging market conditions provide opportunities for medium term growth."
Total retail deposits had increased to $14.5 billion from $13.9 billion as at September 30.
Mr Moore said the removal of the federal government’s wholesale bank funding guarantee, announced on Sunday, had been anticipated and was not expected to affect the bank’s funding position, given Macquarie hadn’t issued guaranteed debt since August 2009.
“Despite improving trends in a number of major markets, we continue to maintain a conservative approach to funding and capital,” Moore said in the statement. “Our strong balance sheet, strong team and encouraging market conditions provide opportunities for medium term growth.”
Macquarie has used the period of the federal government guarantees to recast its business model.
It has quit its listed investment funds, like Macquarie Airports and re-deployed capital into funds management around the world.
Macquarie made six takeovers during 2009, spending more than $900 million to buy a wealth manager, fund manager, investment bank, energy adviser and natural gas trader, all in North America.
The bank bought Sal Oppenheim’s derivatives business late in December, then the equity trading and research operation last week to expand its presence in Europe.
It is now a growing funds management business, with proforma assets under management of $342 billion after the buys and the divestment of the satellite funds.
